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Why the Bitcoin price is different in different countries

As the price of Bitcoin continues to skyrocket and Bitcoin adoption realises rapid growth, we have more and more customers searching for the price of Bitcoin and asking us:

“Why is the Bitcoin price so high/low on Luno compared to the price shown on Google and other exchanges?”

When reviewing the Bitcoin price, it is important to remember that there’s no standard or global Bitcoin price. Bitcoin isn't pegged in any way to the USD or to any other currency, country or any exchange.

It’s almost like asking: “Why does a bag of rice cost more in one supermarket, city or country compared to another?”. The short answer is “because of supply and demand”, but let’s dive in a little deeper for a more detailed look.

The “Google” rate

When you type in “1 BTC to USD” in Google, you might get a result like the one below.

The rate provided by Google and other Bitcoin price trackers is usually just an average estimate or a recently traded price of Bitcoin on some international Bitcoin exchange. Google makes use of the Coinbase API, which gives an estimated price in US dollar, excluding fees.

Even if you had US dollar in a Coinbase account, the price you’ll end up paying for your Bitcoin will be different than the “Google price”, due to fees and many other factors.

Courtesy: Coinbase

Customers from our countries of operation sometimes search for the price of Bitcoin in their home currency: the Indonesian rupiah (IDR), South African rand (ZAR), Nigerian naira (NGN) or Malaysian ringgit (MYR).

When you search for “1 BTC to MYR”, for instance, Google simply shows you the estimated exchange rate of 1 BTC in US dollar, as on Coinbase at that moment, and that dollar amount converted into Malaysian ringgit.

This does not mean that every individual platform that allows you to buy and sell Bitcoin with Malaysian ringgit — like Luno— will trade at exactly that exchange rate at exactly that time.

The price displayed on Luno is unique, simply because the supply and demand — set by the buyers and sellers on Luno— are unique and therefore different from other exchanges, like the Coinbase rate displayed on Google.

Price as at time of writing on https://www.luno.com/price

This often leads new customers to incorrectly believe that the “prices charged by Luno” are higher than what they should be.

👉 To be clear: Luno does not directly buy, sell or set the price Bitcoin. We’re simply a platform that allows people to buy and sell Bitcoin between each other in a certain country.

On supply and demand

Bitcoin exchanges are places where people who have Bitcoin (supply) can sell it to those who want it (demand). This also means that if you have two exchanges —Exchange A and Exchange B— that both support USD and BTC, it doesn’t mean that the price of Bitcoin will be the same on both of them. The price will simply be whatever supply and demand dictates.

If an exchange sees more people selling than they are buying, the price is likely to drop, as supply outweighs demand. The same goes for more people buying on that particular exchange, should demand outweigh supply, the price will go up.

We wrote a detailed piece about how the price is calculated, you can read it here.

Arbitrage

So, if you’ve got Bitcoin trading at different prices on different exchanges, isn’t there money to be made?

If I can sell 1 BTC for 10,999 MYR on Luno, but 1 BTC only costs 9,699 MYR, can’t I make an instant 1,300 MYR profit?

This process is actually widely known in Bitcoin and other markets and is known as arbitrage. If you have identical items — say avocados... or Bitcoin — and it fetches a higher price in one place than another; people will simply buy and sell these assets at the same time, to profit from the difference.

It seems simple: just buy all the avocados (or Bitcoin) in the supermarket, city or country where they are cheap and sell them where they are more expensive. Soon, however, the novice trader will realise that it is a little trickier than just looking at the numbers displayed.

In the same way that it isn’t free to send avocados from one place to another — storage, transport, upfront capital— it’s not “free” to send currencies between multiple countries and platforms.

The costs involved in sending money abroad could include: sending bank fees, receiving bank fees, premiums on exchange rates (which will also differ from the “Google rate”), limits the minimum or maximum amount that can be sent, time delays, price-volatility risk and fees to trade the money for Bitcoin.

That doesn’t mean that it doesn’t occur, it’s just that in certain countries — like Indonesia, Malaysia and Nigeria, where it’s difficult and expensive to send money abroad— arbitrage trading can be difficult, costly and often not worthwhile.

These “premiums” do occur from time to time, but we’ve also seen the opposite happen: where Bitcoin trades for less than it does on international exchanges. It all just depends on the market conditions, something which changes all the time.

Although it is easy to speculate about the causes for the Bitcoin premium seen from time to time, it is important to realise that you are not trading directly with Luno. We merely provide the platform upon which buyers and sellers interact. The forces of supply and demand which ultimately determine the price.

Werner van Rooyen

Werner heads up Marketing and Communications at Luno. His passions include payments, e-commerce, technology, marketing and design: something that he has been fortunate enough to do on three different continents. Werner has lived and worked in South Africa, the United States, Indonesia, Taiwan and China.

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